Tuesday, September 09, 2008

President Bush comes from a business background. Would you expect any less of him covering his executive ass than any other corporate hack?

The New York Times' Sheryl Gay Stolberg brings us the inside scoop on Treasury Secretary Henry Paulson's "plan" to bail out Fannie Mae and Freddie Mac from financial oblivion.

The scoop is: It's all on you, Hank!

“He was all the way in the driver’s seat, and that was where the president wanted him,” said Tony Fratto, Mr. Bush’s deputy press secretary, adding, “The sentiment was, ‘You’re in charge, and I hope it works.’ ”

Hilariously, the author attempts to draw a distinction between Bush's regular sentiment as "The Decider" and this occasion when Paulson is determining the government's policy by saying the president is well educated in economics.

For a president like Mr. Bush, who holds a master’s degree in business administration from Harvard and has strong economic views of his own, Mr. Paulson’s emergence as the administration’s primary voice on economic policy is striking.

Like the war in Iraq, the events leading up to the bailout of these two mortgage giants is a story of government inaction and a suspension of government oversight and regulation.

In my previous life as a mortgage banker, I routinely encountered employees of various mortgage companies requesting customer information. When the figures did not measure up, it was common for employees to blatantly request sending faulty financial numbers. An average balance of around $500 could easily become $2,500 without any oversight.

The government conservatorship of Fannie Mae and Freddie Mac is justified after the administration backed such lax lending practices, but not as a first resort.

At first impulse, a hard-line stand against lender and borrowers seems the most Darwinian method of weeding out this scourge on the American treasury. Sen. John McCain briefly articulated this idea earlier this year before advisors believed it to be lacking populist sentiment.

Did borrowers really believe the panacea of interest-only exotic loans that cost the same amount of capital as paying rent for a two-bedroom apartment was real? No. At least, I hope they did not.

It's the sheer size of this financial debacle that has inured borrowers from taking the full brunt of our economic upheaval. The operative word here is "our". The full brunt of the Bush administration's mishandling of our economy lies at every taxpayer's feet.

The Times story says the cost could run up to $100 billion. What do we get for it? Tracks of unfinished homes in the California Central Valley. Vacant homes with vast brown lawns littered with growing weeds and signs of squatters living in homes that once-about-a-time symbolized the American Dream.

Maybe the white picket fence dream of owning a piece of the American Dream wasn't real during the baby boom years. Today, it's nothing more than a house of cards teetering in a whirlwind of risk and financial ruin.